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The political economy of Myanmar/Burma – Part One

The dust has settled on the "Saffron" Rebellion in Myanmar/Burma – hereafter Burma, though I don’t think we should make so much politics out of name changes (should we care whether a democratic government or a despotic government decides Mumbai is better than Bombay or Yangon is better than Rangoon?) With events in that country no longer making headlines, it is time for some sober analysis. Part of the mainstream media’s failure is their inability to pursue a topic when "things" are no longer "happening" so we do not get any insight into history, social context, politics, or other information that could help us understand why things happened the way they did and what might happen in the future. While the emotion and international outrage brought about by the regime’s brutal crackdown has created some possibility of changing the status quo, channeling the will and resources (such as they are) will also require more analysis than "military bad, monks and students good" which is my general impression of media coverage so far. The first part of this two-part series is directed at understanding the political economy of the country, while the second looks at policies that may or may not have the potential to do much good. Part 1 – ContextWikipedia has a good background article on Burma/Myanmar. From Voice of America News

Burma is rich in natural resources, yet one of the poorest countries in the world. Very little of the revenue goes to the people. Instead, the funds are keeping the country’s military leaders in a life of luxury. Kate Woodsome at VOA’s Asia News News Center in Hong Kong explains how Burma’s money is being spent. Burmese citizens were shocked when a video of the wedding of Senior General Than Shwe’s daughter found its way into public markets and onto the Internet last year. The video shows a portly bride adorned in diamonds and emeralds. Military police are shown escorting wedding guests out of luxury vehicles into a banquet hall decorated with grand bouquets, tray after tray of delicacies, and a five-tiered wedding cake. Min Zaw Oo, a Burmese activist now living in Washington, says it was the first time the general population saw the stark difference between the people and their leaders. "In Burmese culture, Burmese expect their leaders to sacrifice. So when they see a leader of the regime as having this wedding ceremony with all these jewelries, the Burmese people are really angry, not just only because that broke the norms and values of a leader, but also they compare themselves with those people getting rich under this system," said Min Zaw Oo. In contrast to the opulence shown in the video, most of Burma’s 50 million people struggle to feed their families on less than $1 a day. Malnutrition is widespread, and the HIV infection rate is high. Only about three percent of the country’s budget is spent on health care. The country is one of Asia’s poorest, and its government one of the most repressive in the world. But when the government sharply raised the price of fuel in August, tens of thousands of citizens were desperate enough to take to the streets to protest. Last month those demonstrations were stopped with deadly military force. Burma was not always so poor. Fifty years ago, it was known as the "rice bowl of Asia" – one of the region’s richest countries. But the prosperity started to fade in 1962, when leaders of a military coup implemented a plan called the "Burmese Way to Socialism." Sean Turnell of the Burma Economic Watch at Macquarie University in Australia says the military generals nationalized everything – from major enterprises down to the local corner store. "After that, Burma begins to sink into deepest poverty as this agenda, this Burmese Way to Socialism, gradually dismantled all of the institutions you need to run a functioning market economy," he said. Turnell says over the past four decades, military leaders have mismanaged Burma’s economy by combining a rigid, Soviet-type of central planning with superstitious beliefs. "In 1987, a round of demonetization took place where they just declared whole units of the legal currency no longer legal tender and they replaced them by currencies based on the number nine," continued Turnell. "The reason for that was astrologists had told the leading general at the time that the number nine was especially auspicious for him. He says the military leaders have little formal education and are often advised by astrologists. This has led to spending sprees, like the construction of a new multi-billion-dollar capital in the jungle town of Naypidaw. The move from the old capital, Rangoon, began two years ago at 6:37 a.m. – a time recommended by an astrologer. The spending is funded by Burma’s resources – minerals, gems, natural gas and lumber. It is also the world’s second largest producer of opium poppies, and has a growing amphetamine trade. Burma’s gas flows to neighboring Thailand. Its other neighbors – China and India – are competing with South Korea for access to offshore gas fields. France’s Total and U.S. oil giant Chevron also are in on the trade. Regional analysts say most of that revenue and money earned on the black market goes straight to the military leaders and the elite that surrounds them. In the 1990s, the government embarked on a self-promotional campaign and renovated key architectural and religious sites. But Burmese activists say that was its last notable public contribution. In recent years, the country’s earnings have helped enlarge and modernize the military with weapons and equipment from China and India. Last year, members of the military and civil servants were treated to a substantial pay raise. Earlier this year, Burma purchased a nuclear reactor from Russia. The government says it will be used to produce medical isotopes for use in cancer treatments. Ian Holliday, a Burma expert at the University of Hong Kong, says the generals also spend their money in Singapore. "I know they’ve got some property investment. Than Shwe and his family have a luxury villa that they go [to]. I don’t know how much money they put in Singaporean bank accounts. I assume it’s quite a lot," he said. "There’s certainly substantial Singaporean investment in Burma, so I think Singapore would have no problem with Burmese putting their money there." In response to last month’s bloody crackdown on the anti-government protests, the U.S. reinforced its economic sanctions on Burma’s leaders. And the European Union strengthened sanctions of its own. Holliday says the measures will not be very effective. "Things like freezing the assets of named senior members of the government that are held in the U.S. – there are almost no assets that the generals have in the U.S. And nobody from the European Union is thinking of investing in Burma right now," he said. "The consumer reaction would be so extensive, and the country’s just so toxic." Analysts say the only thing that could turn Burma’s economy around is a split in the military leadership. Until then, they say, there will be no end to the spending sprees.

I think the article raises a few interesting points that could use elaboration. * Some people might have the mistaken impression that only a small cabal runs the country and benefits through corruption. The fact is that, in a nation of 50 million people, the armed forces include over 500,000 men. Combined with their families – and the average household size is about 3-4 people, though cohabitation with extended families is common – that makes about 2 million people with direct links to the military. Throw in the civil service and others and it is not hard to believe that as much as 10% of the population benefits from their allegiance to the government. Like Cuba, the former Soviet Union, and other countries with largely nationalized industries, there is a large constituency to maintain the status quo. The regime could not function without their loyalty and support. Now not all of these people benefit to the same extent, and the military is by no means a monolithic single-minded entity. Some of the soldiers reportedly would not carry out orders to fire on monks. But it is important to realize the challenge outsiders face in trying to influence Burma, when a substantial part of the population has a stake in the current system. * A point that is often ignored, thanks in part due to all of the emphasis on the "pro-democracy" movement is the fundamental economic origins of the crisis. In fact, there are remarkable parallels between the recent uprising and the 1988 uprising that ushered in Burma’s first democratic elections since 1962. 1985 – Students gather to boycott government’s decision to withdraw local currency notes 1987 – Government withdraws newly-replaced currency notes from circulation, leaving only denominations of 45 and 90 kyats (thought to be lucky because they are divisible by 9). This has the effect of wiping out many peoples’ savings. 1988 – Student protests led to the death of a student leader, followed by massive protests including including government workers, Buddhist monks, Armed Forces, customs officers, teachers and hospital staff. Over 3,000 are killed by the military. Democracy becomes one of the demands of the students. 2007 – In February and April there are small protests (around 25 people) calling for "calling for lower prices and improved health, education and better utility services." Notably, the protesters are not questioning the legality of the regime’s rule, and carry with slogans like "Down with consumer prices" or "We want 24-hour electricity." Eight of the protesters were arrested but later released. 2007 – On August 15th the government doubled the price of fuel and quintupled the price of natural gas. The reasons for this decision are not completely clear – it appears there was pressure from the IMF and World Bank to reign in budget deficits by cutting fuel subsidies and letting the free market work in the energy sector, but there were also some powerful business interests that stood to benefit. The effect was to cripple the transportation system and increase food prices. There were immediate demonstrations that led to arrests and detentions. 2007- On September 18th, the protests finally got the attention of the international media when the monks took to the streets. As the BBC’s Jonathan Head put it "Within days activists were out on the streets in protest. When they were arrested, the monks – who can accurately measure economic distress by the food put into their begging bowls every morning – took their place." (Interestingly, it seemed the monks were also motivated by the injury of three monks at the hands of government forces during a peaceful demonstration on September 5th, that led a group of monks to take some civil servants hostage(!) to demand an apology – it appears the Dalai Lama isn’t the only Buddhist religious figure willing to take more radical action than passive resistance.) It was the involvement of the monks that greatly increased the scope of the protests and caught the world’s attention, because in a highly religious and superstitious country like Burma it was thought that they could not be touched by military repression. That turned out not to be the case – it looks like once again the spiritual was trumped by the temporal. *In both the 1988 and 2007 protests, economic mismanagement led to small protests, which led to a harsh government crackdowns, which led to larger protests that soon began to demand "democracy." What outsiders like us should understand is that the majority of the Burmese people are not ideologically committed to democracy or a particular form of government – they just want a government that is responsive to their suffering and that offers them some hope for the future. "Democracy" is stand-in for all of their hopes and desires, but if you offered them a competent technocratic state that refrained from arbitrary violence and ushered in economic prosperity, like a Singapore, Malaysia, or even China (well, the verdict is still out on arbitrary violence there), I’m sure the vast majority they would take it in a heartbeat and would not risk their lives for the sole purpose of having multi-party elections. What separates the Burmese government from other non-democratic Asian regimes is their utter incompetence and the fact that much of their wealth derives from the black-market and "crony communism" instead of the preferable "crony capitalism" practiced in neighboring countries. *Focusing the blame on China for the current state of affairs (and the ineffectiveness of Western sanctions) is a bit of a red herring. Christopher Hitchens launches a tirade in Slate magazine aimed squarely at Beijing. To the extent that you think that UN resolutions condemning a country make brutal military governments cry, or that Burma needs the latest Chinese military technology to stop a bunch of students and monks, then you might accept Hitchens’ argument that China’s UN veto and trade ties are the key obstacles to overthrowing the regime. If you have any degree of foreign policy realism, these trade statistics are very unfortunate for Hitchens’ argument. How sad it must be for Hitchens and other idealists and champions of democracy that Thailand (classified as a "hybrid" regime by the Economist Intelligence Unit, putting it in the same league as Turkey, and always a Western favorite) and India (still rightly lauded as one of the few real Asian democracies) are just as important as China in overall trade. They are more important than China as markets for Burma’s exports, which, I hardly need to point out, are the main source of the regime’s cashflow. Let’s also not leave out the contributions of Singapore, Malaysia, South Korea, and Japan, which together add up to almost the same value of Burma’s imports and twice the amount of its exports to China. I’m starting to feel like a paid apologist for Beijing, but I have to keep pointing out places where I think China is unfairly singled out for actions that many economically self-interested or realpolitiking nations carry out. Strategically, using leverage on China may not even be the most effective way of influencing the regime economically. In my next post I will discuss some different courses of action that the international community might take and their likely consequences.

8 thoughts on “The political economy of Myanmar/Burma – Part One”

Muslims all over the world are dying at the hands of their governments, especially in Iraq and Afghanistan. However, when it comes to Burma, the number of people being killed on daily basis is countless yet the human rights organizations around the world have not raised any voice in order to adequately address the outrageous killing of minority Muslims in Burma.

As per the reports, many ethnic Rohingya Muslims in Burma are being killed on daily basis. According the sources, more than 650 of nearly one million Rohingya Muslims have been murdered in Burma till date and almost over 1,200 are missing. Furthermore, around 90,000 have been displaced.

Reportedly, Rohingya Muslims settled in Burma back in the eight century but they have been accepted by the Buddhist community and this is a reason why they are killing innocent Muslims on daily basis.

Countries like the United States have always been prominent in such issues. They have always come out to rescue nations like Israel against Palestine. Nevertheless, since this time Muslims are being killed, they are all silent.

What is happening in Burma, also known as Myanmar, is a direct violation of the international laws and should be categorized as crime against humanity but unfortunately everyone has turned a blind eye and a deaf ear to the plight of the Muslims.

The thing which hurts the most is that Burma’s peace prize laureate Aung Sen Suu Kyi, who once said that ‘the struggle for democracy and human rights in Burma is a struggle for life and dignity’ has also not highlighted the issue yet.

Recently some of the Muslim and Buddhist organizations of India wrote a letter to Indian Prime Minister, Manmohan Singh, in which they demanded his intervention to stop killings of Muslims in Burma.

Well, all said and done, whatever is being done with the helpless minority in Burma should be highlighted immediately in order to stop the Burmese government from doing such a cruel treatment.

This is digusting. I wish they would stop oppressing people like this! I have seen the wedding video mention on this post. It was a 24 part vid. One ring from the general’s daughter’s finger could feed a city. It was like the Marcos family of the Philippines back in the 70s. Only difference was that Marcos the man was brutally intelligent and his wife is deadly so. Unlike these military men of this country that rules with hocus pocus. It is impossible to wish for world peace, but maybe hoping for a little change won’t be so improbable.

A beautiful article, many thanks, so many things to the point. Anyhow, I spent almost 5 years in Burma working mainly with border control and immigration agencies and the military; my experience was damn good, especially with the SLORC. The govt seem to have done endless blunders in terms of economics and management end economic policy planning but when it came to law enforcement the Junta officials were terrific. At least senior mandarins, junior staff were slightly too incompetent for my taste but in the field they still performed very well. Bold, resolute with little respect to human lifes when it came to things that mattered; model cooperation partners in this line of trade, if you ask me. Also most were very sophisticated people I though, so different from the riff raff in the streets. Best regards, erik

Well, my point was more that as always there are strong domestic constituencies for the status quo (just look at the size of the military and the inevitable patronage networks), the origin of the recent crises has little to do with democracy and much more to do with economic suffering, and that the usual bad guy – China – is not the only one to blame (we can add “good” or “semi-good” guys like India, Malaysia, Thailand, Japan, and Singapore). Now sometimes you have to call a spade a spade – the leaders at the very top of the junta are obviously run-of-the-mill kleptocrats enriching themselves at the people’s expense. If you want to call them “evil” I won’t argue, but as I will argue in my next post, it might (and I stress might) be more productive to consider them as rational individuals that will respond to incentives (including positive ones) rather than evil-doers, for whom the only “solution” is violent confrontation.

An interesting article, and I look forward to part II (and III? and IV?) You start by saying that we shouldn’t simply say “military bad, monks and students good”, but isn’t that exactly what we can conclude from your article? This simplistic good vs. evil talk may sometimes be a good summary of a situation, but only sometimes… The one thing that concerns me is that the good are always the powerless and the evil the powerful; maybe things will change as power changes.